Don't Grow Old Without It

Long-term-care insurance: It can make the difference between living out your life the way you want and becoming a burden to your family or a ward of the state.

But it is becoming significantly more expensive, more complicated and harder to get with each passing year.

Average premiums on new policies—which help pay for nursing-home, assisted-living and home care—have risen some 6% to 17% in the past year alone, according to the American Association for Long-Term Care Insurance, a trade group. Some insurers have even doubled their premiums on existing policies. The increases come as the industry grapples with low interest rates and policyholders who are living a lot longer than the actuaries said they would.

At the same time, big companies like Prudential Financial and MetLife have stopped selling new policies in the individual market, continuing a trend that began several years ago. Ten of the top 20 writers of individual coverage five years ago have announced their exit, according to Limra International, an industry-funded research firm.

Ken Kacenga, a 65-year-old doctor in Sierra Vista, Ariz., who plans to retire later this year, got hit with a 23% premium increase recently on the long-term-care insurance he and his wife bought several years ago. The couple struggled with whether to drop the coverage, he says, before finally deciding to keep it for another year while shopping around for other options.

"My fear is…it could become unaffordable as I get into the fixed-income stage of my life," Dr. Kacenga says.

Costs vary widely, even for coverage that is basically identical, according to a March study by the long-term-care insurance group. For example, a $150 daily benefit, lasting three years for a married couple aged 65 in "standard" health, ranges in price from $3,815 a year to $7,129.

That means you could pay nearly twice as much for the same benefits as someone insured by a different carrier.

Unfortunately for consumers, shopping around is difficult. Policies from different carriers are packaged with a proliferating number of bells and whistles. Life-insurance policies and annuities that include long-term-care benefits are introducing more options, but also making the selection process that much more involved.

So how can you figure out how to get the best deal on long-term-care insurance, whether you are buying it for the first time or being hammered with rate increases?

Here are the essentials.

Learn the three moving parts.

ENLARGE

Besides your age and health, three factors have the biggest impact on determining your premium: the daily benefit, the length of coverage and the inflation protection you choose.

To get a sense of your future daily costs where you expect to live in retirement, go to Genworth.com/costofcare. Home care can cost much less than more-intensive institutional care. In Wilmington, N.C., for example, a home-health aide working 44 hours a week costs $40,566 a year, compared with $68,438 for a private nursing-home room with round-the-clock coverage.

You need to decide whether you want a policy to cover the bulk of your exposure, or if you would rather rely on other savings to supplement it, says Natalie Karp, a long-term-care insurance broker in Roslyn, N.Y.

"The new reality is, something is better than nothing," she says. "Get what's affordable and sustainable."

You also will need to select a coverage period, typically ranging from two to six years. If you select $250 a day for three years, for example, you would have a "pool" of $273,750 (multiply 250 by 365 and then by three). If you use less than $250 each day, your benefits would typically stretch longer than three years.

A decade ago, the conventional advice was to spring for unlimited lifetime coverage. That option has become so expensive and so unpredictable for insurers that some have dropped it altogether. Instead, for most people, it is best to choose a "short and fat" policy, with fewer years' coverage and a larger daily benefit. Most people buy three years' coverage, as the average nursing-home stay lasts about that long—though that could follow years of other care.

Many experts consider the level of inflation protection you choose to be the most crucial piece of the policy. Since people typically make their first claims around age 80, those buying policies in their 50s and 60s need to make sure their coverage keeps up with rising medical costs. (Home-health-care expenses remained flat this year, compared with 2011, but skilled nursing-care costs increased 4%, according to Genworth Financial.)

The most expensive—and widely recommended—option is 5% compound inflation protection, meaning your benefits increase in value by 5% each year. For example, your pool of $273,750 would be worth $726,343 in 20 years.

Then there are other inflation hedges meant for older buyers priced out of that option, including 3% or 4% compound, 3% or 5% simple (meaning a $100,000 benefit would simply get $3,000 or $5,000 tacked onto it each year), 5% compounded for 20 years only or one linked to the consumer-price index.

Brace yourself for a rate increase.

Insurers can't raise rates on individuals, but they can do so on a defined group of policyholders if they get state approval. Benny Stansbury, a 70-year-old retired engineer in West Monroe, La., dropped a policy he bought from a smaller carrier after being hit with a 105% rate increase.

The lesson: It pays to look for insurers that have strong financial statements and conduct significant business in your state.

The majority of rate increases should be over, now that insurers have factored in the impact of low interest rates on their ability to generate income to pay claims and lengthening life expectancies, says Dawn Helwig, a principal with actuarial firm Milliman in Chicago.

But many insurance brokers tell their clients to expect at least one increase in the 20% range at some point. If that happens, most insurers will allow you to reduce the increases in exchange for trims in benefits.

Insurance agent Nancy Courser helped Rob Deane, a 75-year-old retired Navy surgeon in Grand Rapids, Mich., lower the 77% rate increase on his 70-year-old wife's John Hancock policy to 46% this month by reducing her 10 years of coverage to six years. Rather than seeing premiums rise from $3,619 a year to $6,406, they will go up to $5,269.

Insurers are getting pickier.

Medical underwriting is getting "more conservative," says Buck Stinson, Genworth's president of U.S. insurance products, and rejection levels are growing.

Eleven percent of applicants under age 50 were denied in 2010, up from 7% in 2007; 17% of applicants in their 50s were denied, up from 14%; and 24% of those in their 60s were denied, up from 23%, according to the American Association for Long-Term Care Insurance.

Evidence of chronic conditions often knocks out applicants. People with diagnosed memory loss or arthritis are almost always denied, and insurers are getting tougher on osteoporosis and diabetes, experts say. Ms. Karp has even had clients rejected for being too thin.

Surprisingly, insurers approve survivors of some conditions, if they can show resolution and stability, including cancer, bypass surgery, Crohn's disease, congestive heart failure and forms of hepatitis, Ms. Karp says.

Insurers scrutinize two to three years' worth of medical records, including those kept by specialists, test results and prescription-drug databases. They also may require phone interviews and face-to-face meetings.

Rest up beforehand: Much of what your interviewer asks is designed to screen for cognitive problems. "They ask you to count down from 100 backwards, or you have to name as many fruits as you can," says David Hays, president of Comprehensive Financial Consultants in Bloomington, Ind.

Go for cash and flexibility.

A few insurers offer cash benefits of up to half your monthly allowance and require no receipts. You still have to meet the threshold for needing care that most insurers require: Documentation from your doctor that you require help with at least two "activities of daily living," which include bathing, dressing, eating, getting in and out of bed and to the bathroom, continence, and walking, or that you need care due to cognitive impairment.

With the cash option, the insurer cuts you a check with no other questions asked, which you can use to buy care however you wish, from hiring a family member to moving to a resort. This also can be useful if you plan to retire overseas, says Rona Loshak, Ms. Karp's business partner, though some policies limit how much cash can be used for international expenses.

Make sure your policy includes an "alternate care benefit," which generally features language recognizing that new trends in long-term care are emerging, and coverage could be provided in the future for those not specifically spelled out now. Today's more popular options—home care and assisted living—weren't even covered under many insurance policies issued two decades ago.

Also consider a "shared care" rider that gives you and your spouse access to each other's benefits if you use up your own.

Make the government your partner.

The Long-Term Care Partnership, a federal and state program now available in about 40 states through 30 insurers, lets people preserve some of their assets and still qualify for Medicaid if they have purchased a long-term-care insurance policy.

In most states, it works like this: You buy, say, $250,000 in coverage. If you use it up, you can qualify for Medicaid while protecting up to $250,000 in assets.

The catch: States generally require that you buy an inflation-protection rider and a specific amount of coverage. Depending on your age and health, that may not be affordable. If you were going to buy the coverage level that the state requires anyway, "there's no additional cost to buying a Partnership plan versus one that's not, so why not buy it?" says Mr. Hays.

Exploit tax breaks.

Depending on where you live, tax breaks could ease your payments significantly. New York, for example, offers a 20% income-tax credit for annual premiums. And if your spouse has medical bills steep enough to itemize on your federal tax return, you might reach the threshold to deduct premiums as a medical expense.

If you are a business owner or partner, the firm can deduct specified premium payments for you and your spouse, depending on your age, from your federal taxes owed. And if your business is a "C" corporation, it can deduct the entire bill. In that case, you may want to consider a policy with higher premiums that are due for only 10 years, or until you turn 65.

Consider a hybrid.

The biggest stumbling block for buyers of long-term-care policies: Writing a big check for a product you hope you never have to use. Increasingly, retirees are turning to permanent life-insurance policies and deferred fixed annuities packaged with long-term-care benefits to cover the risk of spending much of their savings on nursing care.

The appeal: You or your heirs get a payout even if you don't use long-term care, though it often is more costly to buy combined coverage than to buy separate policies, experts say.

In most cases, people buy these products with a single lump-sum payment, effectively removing the risk that they could get hit with future premium increases.

There are other tax perks as well: Payouts used for long-term care generally aren't taxable, and funds can be transferred directly from an annuity or life-insurance policy to buy such a "hybrid" without being taxed, either.

But there also is a big unknown: Most hybrid products have been around for only a few years, so very few people selling them have any clients who have tried to collect the benefits yet.

"We have no way of knowing if these policies will self-destruct in the future or not," says Mary Ahearn, a financial planner in Cochise, Ariz. "But they are offering to lock in our risk."

Corrections & Amplifications Rob Deane's long-term care insurance premium this month was scheduled to increase from $3,619 a year to $5,269. An earlier version of this article incorrectly said the premium was per month rather than year.

When researching on whether to buy Long Term Care Insurance or long always keep this concept in the back of your mind. Like with any insurance such as your home owners policy, there is a very good chance you will buy LTC Insurance and never use it. In fact, the insurance company is banking on it. So if you do end up not using your LTC policy and did not buy a huge amount of insurance, you saved thousands of dollars because you did not buy a massive plan. However, the risk of needing LTC is real and can be expensive if not planned for. So if you have assets to protect and are not super wealthy, buying this coverage might be a good idea.

We work with all the major companies and have no preference to any one over the other. LTC Tree's process is virtual, we never will try and do the old-school sales pitch at your kitchen table. We will mail it so you can review things at your own pace.

Given the low interest rate environment, Long Term Care Insurance companies are beginning to charge more to compensate for lower investment returns on their bond portfolios (note: insurance companies invest policy premiums in bond portfolios).

One of the largest Long Term Care Insurance companies announced it will be introducing a new version of its policy in late July 2014. The company will use more conservative return assumptions on its bond portfolios. This is estimated to result in higher prices for the same levels of benefits offered today with the current version of its policy. Furthermore, it is slashing the length of coverage you can purchase from 10 years to 5 years.

On a complimentary basis, let us show you quotations from the top blue chip companies:

Insurance companies price policies based on their risk. There is a 7 in 10 risk you will need Long Term Care if you live past the age of 65. There is a 10 in 10 risk you will die. Insurance companies charge more for Combination policies than Traditional policies because they are taking on more risk. Traditional and Combination policies have unique advantages compared to one another, as seen in the article link below.:

Pricing for the same level of long term care insurance coverage can vary greatly between companies, with some companies charging over 100% more than others. Work with an independent insurance agent that can provide quotations from numerous companies. On a complimentary basis, let us show you quotations from the top blue chip companies:

The choice is pay now, or possibly pay much more later. Women have almost twice the risk for long term care as men. Women often end up taking care of their husbands leaving fewer resources for them if they need care.

Filial law states allow the state to go after the children's assets to pay for parents care ( ltcinsurancequote.com/#filial ). There was a recent story "Son Hit With Aging Parent's $93K Nursing Home Bill"

Jonathan Pond, Financial Planner, says that 90% of estates are spent this way: 1) nursing home, 2) IRS, 3) children, 4) grandchildren, 5) charity. More people are worried about the IRS taking their money than about having to spend it on a nursing home.

Some 75 million boomers are ill prepared to cover the costs of long term care especially since Medicare and health insurance does not cover the bulk of long term care and Medicaid only does once someone has spent their live savings to the poverty level. longtermcare.gov

With only about 10% of those buying long term care insurance (nationalltc.com) the rest will spend their estates on paying for care and some will end up on welfare health care (Medicaid) after spending all their money.

The Federal Deficit Reduction Act provided for every state to have a Partnership program to provide asset protection for those who buy qualified long term care insurance policies. partnershipforlongtermcare.com - those of middle income may want to consider the asset protection available with this insurance.

An alternative are linked-benefit products, Life insurance or annuities with long term care riders. In many states you can also use your qualified money (IRA/401k) to fund your plan. guidetolongtermcare.com/linkedbenefit.html

Good comments from the author. Those tips are a great baseline to start a Long Term Care Insurance research project with. One thing I feel was left out, which is the most important, is how to buy this. If you let an agent into your home they have the upper hand and will use it to pressure you into acting quicker than you'd like.

Our company is LTC Tree and we will give online quotes and do everything through the mail and phone. We will help you shop around and get the best deal by comparing the top 10 companies and playing them against each other. If you'd like to learn more about our process please click the link below.

Nice to see good information regarding LTC insurance palnning. The products are evolving and approaching stability. At the recent ILTCI convention last month, the providers in the LTC arena proclaimed their commitment to addressing the continuous need for "retirement income protection" by developing products that are flexible and affordable. The important point that must be adrressed is to have a plan. The consequence of NOT having a plan for a possible an extended care need can be financially and emotionally devestating.

@ Warren, Based on your comments, what you know about insurance wouldn't fill a thimble.

Insurance contracts are approved, reviewed and overseen by state insurance boards. Unless you happen to be a licensed agent (which I sincerely doubt) you should refrain from commenting on a subject outside of you limited base of knowledge lest some unsuspecting reader mistake your comment for informed opinion.

Clear enough for you Peter?

BTW please share with the readers what insurance Co failed in 2009. If it's a property Casualty insurer I would ask what bearing that has on Long Term Care Insurance. If you don’t understand the difference I won’t be surprised.

Thanks Peter. I appreciate this answer. Our policies are 100% refundable so if we end up having enough to self insure we can turn them in. I thought of all LTCI policies I considered this seemed to be the lowest risk with the highest rate or return if we use it. There are no guarantees in life - but on the other hand is it worth not having it at all and hoping for the best? My parents are 90 and 92 and so far have not needed long term care. I assume if they do it will be for a short period indeed. Will I be so lucky? Will my husband? I don't know. It was a very difficult decision to make, and now it is proving difficult to keep.

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We paid into two well-known long-term care packages for twenty years. We had questions and they would not respond to our voice messages. The only time we heard from them was when we cancelled their autodraft by changing checking accounts. And those were dunn calls. Later, we had two senior members of our family into full time care due to Alzheimer's. As we recall, we were paying $3,000 for our two policies for decades. And we paid $3,500 monthly for years for their Alzheimer's care before each passed, perhaps five years. When I do a cost benefit analysis, I can easily see the profits these insurance companies make. It is silly to buy these long term care polices and I am now convinced that they prey on the fear that somehow if we pay insurance we will not need to worry about getting age related diseases and dying. It is my opinion the author of this article has not compared the total costs over time or is acting as a shrill to buy from the author's sponsoring insurance company. It is simply a case of financial impact given the probability someone will need full time care. In my opinion, you are better off investing that $3,000 into quality stocks with dividends so that you will have surplus cash when you need it later on. In essence, insurance is a racket and pays well for the people in Congress and the White House. Do the numbers yourself, take $3,000 per month at nominal 7% return plus nominal 5% dividend year over year for twenty years. Or give to the insurance company and see what it is worth when you stop paying for twenty years. Who will help you then on the 21st years?

You didn't point out about the increased costs for home aid workers that will rise with the proposed DOL change. I'm still researching the full details but right now, in California, the minimum salary for a worker will be $86K/year plus benefits based on the proposal. You are required to pay overtime for every moment inside the house including when they're sleeping.

I have a top of the line, fully paid LTC policy for myself and this provision alone will suddenly make that policy worth 30% less in benefits covered.

"But there also is a big unknown: Most hybrid products have been around for only a few years, so very few people selling them have any clients who have tried to collect the benefits yet. 'We have no way of knowing if these policies will self-destruct in the future or not," says Mary Ahearn, a financial planner in Cochise, Ariz. "But they are offering to lock in our risk.'"

My husband and I each bought one of these products for $100,000 each. I am younger and get about $500,000 worth of care and he gets about $250,000 worth. We can get a refund on the policy anytime, I assume that the insurer, who my financial planner tells me is very reputable and they seem to be from what research I have done, feels they can get more out of the $100,000 by investing it even if they give it back to us because the policy was unused. That's why I wish they did not leave these haunting comments to the end of this article and talked more about how these policies could collapse, and why or how the insurer could deny payment on them.

Per my discussion with Kelly Greene in advance of this article, the cost of long term care will likely continue to increase as will the need for long term care. Long term care insurance, like automobile or homeowners insurance, shifts the risk for a large expense from you to the insurance company. While you have a 1 in 340 chance of a major auto accident and a 1 in 1,200 chance of a total loss from a fire, you have a 7 in 10 chance of needing long term care (if you live to 65 years of age or older).

Fortunately, most long term care insurance policies can be purchased with inflation protection. With inflation protection the policy's benefits will grow and keep pace with the rising costs of long term care. In most states, policies with inflation protection are certified under the state’s Long Term Care Partnership Program. Partnership Program certification is available in two versions (depending upon your state): 1) Dollar for Dollar asset protection – with each dollar a policy pays in benefits a dollar of assets is ignored by Medicaid. 2) Total Asset asset protection – an unlimited amount of assets are ignored by Medicaid. Importantly, Dollar for Dollar and Total Asset Long Term Care Partnership Program certified policies protect your assets from Medicaid without a “look back” period.

Waiver of Premium. Policies with a waiver of premium allow you to stop paying their premiums when the insurance company begins paying your claim. Not only is this a saving grace during a difficult time, but when you stop paying premiums you are unaffected by rate increases.

Joint Waiver of Premium. Polices with a joint waiver of premium allow either you and your spouse or partner to stop paying premiums when the insurance company begins paying either of your claims. When each of you stop paying premiums both of you are unaffected by rate increases.

Mitigating a Rate Increase. Purchasing a policy with a limited pay option can mitigate the risk of a rate increase. Many insurance companies offer a “Pay-to-65” option that allows you to pay the premiums until you reach age 65, at which time the policy is paid in full. Many insurance companies offer a “10-Pay” option that allows you to pay the premiums over a period of 10 years, at which time the policy is paid in full. On top of that, some companies offer a rate guarantee that can overlap a limited pay option. Once a policy is paid in full rates can never be increased.

Insurance Commissioners Reject Rate Increase Requests. Some Insurance Commissions have been strict with long term care insurance companies, approving only a fraction of the requested rate increase on existing policyholders. Some Insurance Commissions have been very strict with long term care insurance companies, outright rejecting the rate increase request on existing policyholders.

"No other insurance product is designed to cover a risk that is likely to occur that far in the future. Second, the pooling effect of insurance doesn't work when the risk is likely to happen. Insurance only makes sense when the risk of the bad thing happening is unlikely."

Wrong. Permanent life insurance does exactly that, and has been doing it over many, many years. It works as long as the insurer can earn an actual return on the premiums collected in the early years. That's not so easy now, hence the companies dropping out.

As far as alternatives to private insurance, what would they be, a government plan? We have that. It's called Medicaid. How's that working out?

These comments have been very reassuring and have helped me to see that I don't need to worry about this topic at all!

First, half the population has decided to commit suicide when things get sketchy as Constantine and Russell pointed out. Second, Laurie explained that if you have enough money to buy LTCi then obviously you have enough money to pay for your own care. The only thing you have to do is pay cash for a second house, wait until it drastically increases in value, then sell it right before you need care.

Maybe everyone should be less concerned about the rising cost of LTCi premiums and focus more on the extreme cost of care giving and how to solve that problem.

Our society currently gives relatively young, healthy people two choices about how to pay for long-term care. The first choice is to do nothing and the second is LTCI. Unfortunately, LTCI makes no sense in a perfect world as it violates at least two fundamental insurance principles. First, it makes no sense to insure against a risk that is remote in time. That is, it doesn't make sense for a 55 year old to insure against something that might occur when they are 85. No other insurance product is designed to cover a risk that is likely to occur that far in the future. Second, the pooling effect of insurance doesn't work when the risk is likely to happen. Insurance only makes sense when the risk of the bad thing happening is unlikely.

In the imperfect world that we live in, those concerned about how to pay for their long-term care have to evaluate LTCI and this article presents a good overview. Hopefully, however, we develop other alternatives as private insurance is not the way to finance long-term care or any other likely health care need.

Well said. This is a new area ideal for fleecing people. A policy that you will not use for 30 years, that can increase in cost dramatically at any time, and that has so many conditions to confuse and provide an out to the issuer is just too big a risk by itself. How about seeing tax benefits for a HSA specifically designed for elder healthcare (except you keep the money)???

Kelly Greene's article is fairly accurate, but there are a couple of points I would like to clarify. "Unfortunately for consumers, shopping around is difficult" is only true if your insurance agent hasn't personally written at least 100 LTCI policies. Find an agent who knows how to shop for you. Unfortunately, there are some property and casualty and life insurance agents and some financial planners and stockbrokers with insurance licenses who "moonlight" by writing an occasional LTCI policy at a customer's request. Look for an agent with a CLTC or similar designation ["Certified in Long Term Care"] AND many years of LTCI underwriting experience. "People with diagnosed memory loss or arthritis are almost always denied... [coverage]" is not quite a true statement. Medically diagnosed permanent memory loss resulting from Alzheimer's, strokes, dementia, etc. is a condition that always will be declined for coverage. However, temporary memory loss that can be explained by exhaustion from sleeplessness, overwork, family worries, or "caregiver burnout", can be insurable if the condition or circumstances have been resolved and memory is now normal. Osteoarthritis, is insurable-as long as it's not combined with co-conditions like severe osteoporosis or repeated fractures or being severely underweight . Underwriting rheumatoid arthritis is more complicated-especially if you have had joint replacements, fractures or falls. Also, the usefulness of hybrid life insurance-LTC policies or annuity-LTC policies, depend upon the premiums and your circumstances. A "return of premium upon death rider" added to a traditional LTC policy may be much less expensive than a hybrid policy. Also hybrid policies rarely provide the level of LTC benefits a traditional LTC policy would-unless you're prepared to spend a lot of money to cover two problems with one premium. The "use it or lose it" fear shouldn't push a prospective policyholder into buying life insurance or an annuity unless they are really needed.-Steven Pelly, CLTC, Westwood Insurance Group, River Vale, NJ

As always excellent and well balanced coverage. Some of the important things we discussed that didn't make it into the article are that prices for virtually identical coverage can vary by 70% to 100% ... and acceptable health conditions can vary as well. That makes it most important for folks to comparison shop or make sure they are working with a knowledgeable professional who does the comparing for them.

One of the very best, most accurate and fair articles on LTC insurance and rate increases I have seen in many years--kudos, Kelly!I saw only one possible typo: "seeing premiums rise from $3,619 a month to $6,406, they will go up to $5,269."My best guess is that was per year, not per month. In 17 years of experience, I have never seen a policy (or even two policies) cost that much per month, if it is truly per month! Downsizing to 6 years was a good solution.Policyholders: To lower costs on your existing LTCi policies, pivot on years first, elimination 2nd. Just know that you will usually need to pay more days out of pocket up front the longer you make the elimination. Lower your daily benefit or inflation only with the greatest of care, as some policy provisions could wipe out your inflation gains from original purchase if that is adjusted. Some carriers raising rates are making special allowances to help policyholders keep their policies at a lower premium w/ lower inflation, while still keeping their inflation gains. If you are already older, less inflation may work for you. Work w/ your agent or an LTC specialist, as the policy protection remaining after any cuts made to keep your premiums affordable must still fulfill your concerns of why you got LTCi in the first place.My policy costing $1400/yr would cost me $11,670 a year if I bought it today. It has doubled in daily benefit and I got 16 years older. Even if it doubled to $2800, I am going to hang on to it for dear life!

It is written in a variety of ways but what has happened is the Carriers because of rates of return, retention of plans, and people using the plans longer then anticipated is putting stress on the insurance companies.

I forecast that in a few years -- plans and premiums will stabilise.

The issues around why we need to plan and own care giving benefits is real. It is not helpful to own a plan and the premiums rise but it happens with most forms of insurance as it is for other items we purchase.

What is distinctive about LTC Insurance -- once you own it, you never know when your health will change and it may never be available. In addition, premiums may rise with the plans but to own a new plan will cost more based on your age, premimum ratings, and plan benefits.

YOu must be an investment genius to earn an annual AFTER TAX 12% total return (7% nominal, 5% dividend) on a high quality dividend stock strategy. I say aftertax, because LTCi benefits are taxfree, so to compare apples to apples you have to look at net returns.

Realistically I think you'd be lucky to get a 5% net aftertax return. When you run the numbers on that compared to a LTC premium, the asset pool isnt even 1/3 of the LTC pool that grows at 3% annually.

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actually, permanent life insurance isn't really life insurance.Life insurance is really term insurance - eg. for some reasonable fee like $300/mo at age 45 you get 1$M of coverage for that month (an insurance can also give you a quote so if you keep paying that $300/mo the rest of your life the premium doesn't go up with age).What permanent life insurance is, is a fee for term insurance (say $300) PLUS a much larger fee (say $1700/mo) in order to build "cash value." Insurance salesmen use this to create the illusion that only with permanent life, you aren't "throwing money away" but it's just a gimmick (I've heard the pitch, then run the numbers). You're essentially paying a mortgage and reinvesting the interest with favorable tax treatment. But it isn't "insurance" in the sense of risk pooling, risk coverage. It's an investment plan coupled to a small extent (10%) with an insurance product.

What you forget to take into account are the unexpected curve balls in life. Long term care needs can hit at any time. One month after one of my 40+ yrs old clients bought his LTC insurance, he called to say thank you. His next door neighbor had a motorcycle accident and became paraplegic at 43.

I wasn't surprised that Metlife exited the LTC market. Their current claims record have a large number of claimants in their 40s due to the accidents that people experience during their vacations.

Yes, Mr. Pelly, but most of the "insurance agents that have written at least 100 LTCI policies' are in it for the money and thus not likely to sell the policy that is truly in the customer's best interest. Annuities anyone??

It should not be complicated to understand and buy these policies, and the insurance company and insurance agent are the winners in a confused marketplace.

I didn't forget to take it into account. I said that in the imperfect world we live in those concerned about how to pay for their long-term care have to evaluate LTCI as one of two options. FWIW, LTCI would make sense if it only covered say those in their 40s to 60s. With that age group, those suffering a loss would be totally random and it is that randomness that allows for pooling of risk provided by insurance to be effective. You lose that pooling effect once you get to the 80s and 90s and the need for LTC becomes too likely and certain.

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